Statistics South Africa (Stats SA) reported on September 29 that employment in South Africa declined by 2,2-million during the lockdown-hit second quarter of 2020.
Lullu Krugel, chief economist at PwC Africa Strategy&, and Dr Christie Viljoen, PwC Strategy& Economist, unpack the latest numbers.
The official (narrowly defined) unemployment rate dropped to 23,3% in Q2 from a record-high 30,1% in the preceding quarter.
However, this statistical fluke was due to a 33,4% q-o-q increase in the number of people classified as “not economically active”. This grouping includes adults who were able and available to work but was without a job, did not look for work, and did not try to start their own business.
Around 2,8-million of these people were during Q1 still considered unemployed, i.e. looking for work in Q1 but unable to do so during Q2.
With so many people stuck at home during April-June, and with these people included in the “not economically active” due to the lockdown keeping them from job hunting, the number of South Africans classified as unemployed fell by 39,2% q-o-q during the second quarter to just 4,3-million.
This resulted in the sharp dive in the Q2 unemployment rate. Stats SA noted that a large increase in inactivity other than in unemployment (that is, being not economically active) has been observed in most countries across the world. As such, “the picture observed in South Africa is in line with the rest of the world”.
It would be much more accurate to consider the expanded definition for the unemployment rate – measured at 42% in Q2. This calculation includes jobless people that have valid reasons for not searching for employment.
In this case, the primary reasons were lockdown restrictions on human movements and business operations.
Under the expanded definition, the number of employed people in the country declined by 2,2-million between the first and second quarters of the year. This resulted in the expanded unemployment rate increasing from 39m7% in Q1 to 42% in Q2.
There were also some statistical quirks that kept this increase limited – though at least it gives a better approximation of joblessness than the narrowly defined unemployment rate.
On an industry level, all the 10 major sectors tracked by Stats SA shed jobs during the second quarter. Of course, at least some of these jobs would have been recovered during the second quarter as lockdown restrictions eased.
Some of these newly unemployed people were, during the second quarter, seen as not economically active because lockdown restrictions kept them from clocking in at their existing jobs or going out to find a new position. For example, many of the 278 000 jobs lost in the construction sector and 373 000 employment opportunities lost in the trade sector (including hotels and restaurants) would have been temporary.
Unfortunately, many would also be permanent.
As a result, many of the second quarter’s ‘not economically active’ people will during the third quarter be considered unemployed. This, in turn, could see a re-deterioration in the official (narrowly defined) unemployment rate.
Looking ahead: rising unrest
Some of the 2,2-million jobs lost in the second quarter will be recovered during the second half of this year. However, PwC still expects a net loss of 1,5-million jobs by year-end.
This will compound the existing challenges seen prior to the pandemic in creating enough value-adding jobs in South Africa.
These include challenges with labour market regulations and education outcomes. PwC’s ADAPT framework (recently updated to incorporate elements of Covid-19) has warned that in demographically young economies like South Africa, governments will be faced with chronically high youth unemployment over the full spectrum of education levels.
If unsuccessful in addressing unemployment issues, PwC’s ADAPT framework warns that societies may face increasing social unrest.
This rising social and political unrest is already manifesting in South Africa. Following strict movement controls in April and May, protest and other related action increased across the country as lockdown regulations eased.
Data from the Armed Conflict Location & Event Data Project (ACLED) shows that the country experienced 180 protest events from 1 to 28 September. This will result in September having the most protest events during a calendar month since the appointment of President Cyril Ramaphosa early in 2018.
The number of protests during the third quarter will be the highest in many years.